LOS ANGELES--()--The fourth quarter 2012 Market Pulse Survey Report by the International Business Brokers Association (IBBA), M&A Source, and Pepperdine University’s Graziadio School of Business and Management found that, for the first time, baby boomer retirement is the number one reason driving business sales across all Main Street and lower middle market sectors. While boomer retirement always ranked high among sale motivators, potential tax increases had been the primary concern for some business sectors in 2012. The survey found burnout and family issues to be other leading drivers.
“Many boomers would have sold in 2009 or 2010 but they got blindsided by the recession and had to hold on much longer than expected.”
“The fourth quarter 2012 Market Pulse Survey (http://bschool.pepperdine.edu/privatecapital) shows that the majority (65 percent) of brokers and M&A advisors are feeling optimistic about market activity in 2013,” said Dr. John Paglia, associate professor of finance and director of the Pepperdine Private Capital Markets Project, ongoing small business financing research conducted at the business school. “They’re expecting activity to increase due to baby boomer retirements (35 percent) along with greater market clarity following the presidential election (20 percent) and fiscal cliff resolutions (14 percent).”
The latest report is based on the responses of 215 business brokers and M&A advisors to a survey conducted between January 10 and February 1, 2013.
“Boomer retirement will be a consistent trend, particularly now that 2009 is four years behind us for valuation purposes and the first boomers are now 67 years old,” says Scott Bushkie, principal of Cornerstone Business Services. “Many boomers would have sold in 2009 or 2010 but they got blindsided by the recession and had to hold on much longer than expected.”
“People might not like everything that happened in Washington over the last few months, but at least now they have the answers they need to move forward,” says George Lanza, president of Plethora Businesses and chairman of IBBA. “Combine the U.S. election and fiscal uncertainty with the financial mess over in Europe, and it’s not hard to see why many sellers were just sitting tight and waiting for the dust to clear in 2012.”
The report also clearly indicated that larger businesses take longer to sell. In all Main Street sectors, the majority of companies (56 percent or better) sold in six months. For businesses in the lower middle market, the majority closed between eight months and two years.
“Companies in the lower middle market really need to be proactive in their planning,” said Kevin Dempsey, principal of Summa Financial Group and chairman of the M&A Source. “Burnout and family issues are two big reasons these owners sell, but when it takes a year or more to sell a company, you don’t want to be reacting to negative triggers—especially as buyers put the most value on your last 12 months of business performance.”
Other key findings:
- Main Street M&A continues to shift away from a buyer’s market sentiment, suggesting a balancing of leverage in this sector. In Q4, 53 percent of Main Street brokers representing deals of $500K or less said they were operating in a buyer’s market. That’s a decline from 70 percent in Q2 and 60 percent in Q3.
- Existing companies were the most common buyer in the lower middle market and the $1 million-$2 million Main Street sector. Individuals who had previously owned a business also played a prominent role in Q4, ranking second across most of the markets.
- For companies under $1 million, most buyers were located either within the same metro area or same state as the selling business. But for businesses valued over $1 million, buyer distance jumped considerably with more than half (55 percent) coming from out of state.
The fourth quarter 2012 Market Pulse Survey may be found on the Pepperdine Private Capital Markets Project website at http://bschool.pepperdine.edu/privatecapital.
About the Market Pulse Quarterly Report
The International Business Brokers Association (IBBA) and M&A Source, in partnership with Pepperdine Private Capital Markets Project, have set a goal to provide quality information on a quarterly basis in order to become the go-to source for Main Street and lower middle market transactions. The “Market Pulse Quarterly Report” gives business owners and their advisors access to current market conditions and trends regarding business sales across the country to help them make well-informed decisions regarding selling their business. It also gives business brokers and intermediaries timely and accurate data to help them build and maintain a successful and sustainable business.
About Pepperdine University Graziadio School of Business and Management
Founded on the core values of integrity, stewardship, courage, and compassion, Pepperdine University’s Graziadio School of Business and Management has been developing values-centered leaders who advance responsible business practice since 1969. Student-focused, experience-driven and globally oriented, the Graziadio School offers fully accredited MBA, Masters of Science, bachelor’s completion and non-degree executive business programs for business professionals, entrepreneurs, managers and senior executives at all stages of their professional and personal development. More information: http://bschool.pepperdine.edu/newsroom
About International Business Brokers Association (IBBA) and the M&A Source
Founded in 1983, IBBA is the largest non-profit association specifically formed to meet the needs of people and firms engaged in various aspects of business brokerage, and mergers and acquisitions. The IBBA is a trade association of business brokers providing education, conferences, professional designations and networking opportunities. For more information about IBBA, visit the website at www.ibba.org.
Founded in 1991, the M&A Source promotes professional development of merger and acquisition professionals so that they may better serve their clients’ needs, and maximize public awareness of professional intermediary services available for middle market merger and acquisition transactions. For more information about the M&A Source, visit the website at www.masource.org.